Bank Stocks Hold Back Markets: Dave's Daily

Banks thwarted the market's rally today and may be a classic short if only for insurance protection.
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I'm not smart enough to know if we're in for a reprise of 2008. I do know the current mortgage scandal(s) are making their appearance in similar fashion as in the fall of 2007. Then markets rallied despite worries about financials. Some say it was a "black swan" event when markets collapsed the next spring but the news was there for all to see.

Something's rotten it seems. Whatever the extent of the problem is either being covered up or brushed off just as in 2007. Color me a skeptic but still following the dictates of the tape rather than my gut.

Banks thwarted the market's rally today and may be a classic short if only for insurance protection.

Bernanke gave the speech every bull wanted hear yet markets remained on edge most of the day. For dessert, Ben served another round of

POMO

($5 billion) yet bulls, away from tech anyway, steered clear of all things financial.

Tech on the other hand was boosted sharply by Google's report and Seagate's desire to go private.

Low volume, a recent market enigma, was much higher today while breadth was mixed overall.

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Continue to U.S. Sectors, Stocks & Bonds

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Continue to Currency & Commodity Markets

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Continue to Overseas Markets & ETFs

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The

NYMO

is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

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The

McClellan Summation Index

is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends.  I believe readings of +1000/-1000 reveal markets as much extended.

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The

VIX

is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

Continue to Concluding Remarks

Am I feeling a little too paranoid about banks and the current mortgage mess? Possibly but I have this déjà vu feeling from the previous bear market. Cynically we know the government has ruled out doing anything about this condition since the election is soon. This administration couldn't handle another blowout disclosure. Also, somewhat unnerving is the condition of the Summation Index (nearing overbought) and the VIX (complacency). The last time was in April when thereafter markets fell sharply.

So color me wary.

Nevertheless we have plenty of long positions since being wary doesn't translate to profits necessarily.

Have a great weekend and we'll see how they deal the cards next week.

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Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, MDY, IWM, TNA, QQQQ, QLD, FDN, XLB, UYM, XLI, XLU, IBB, UDN, GLD, SLV, DBC, DBB, DBB, JJC, KOL, DBA, JJG, MOO, EFA, DZK, EEM, EWJ, EWY, EWA, EWC, EWG, EWS, EZA, EWZ, EPI and FXI.

The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security.  Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period.  Chart annotations aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at

www.etfdigest.com

.

Dave Fry is founder and publisher of

ETF Digest

, Dave's Daily blog and the best-selling book author of

Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management

, published by Wiley Finance in 2008. A detailed bio is here:

Dave Fry.